Plaintiff filed income tax returns as a self-employed seamstress for the
years 1963 through 1966. No business expenses were reported and the
documentary evidence offered to substantiate her alleged self-employment
income was in the form of two notebooks. One listed personal expenses
rather than business expenses, and the second contained entries with the
names and addresses of her clients and amounts allegedly paid by each for
her sewing services. None of the individuals listed was able to
substantiate the entries made. Many of the individuals who allegedly had
paid plaintiff for her services had moved from the area prior to the dates
shown in the notebook. Held, in questionable cases, the Social
Security Administration is not only privileged but is obligated to look
behind the form of self-employment tax returns which an individual has
filed. It is the actual receipt of self-employment income, not the
reporting or payment of taxes thereon, which is the crucial test for
establishing a valid claim. Since the plaintiff has failed to introduce
sufficient evidence of probative value to support the amounts claimed by
her, the Secretary's denial of old-age insurance benefits is affirmed.

FERNANDEZ-BADILLO, District Judge.

Claimant Josefa Hernandez seeks judicial review in this Court pursuant to
42 U.S.C. § 405(g) of the final decision reached by defendant disallowing
her claim for old-age insurance benefits on the ground that she failed to
establish the required eleven quarters of coverage for fully insured
status under the Social Security Act.

The basic facts underlying this case are not in conflict. Plaintiff filed
a prior written application for old-age insurance benefits on September
25, 1963, based on self-employment income derived during the years 1960,
1961 and 1962 from her labor as a seamstress. This 1963 application was
denied and no further administrative action was taken by her. The current
application for old-age insurance benefits is based on net earnings from
self-employment[1] as a
seamstress during the years 1963, 1964, 1965 and 1966. It is undisputed
that she needs eleven quarters of coverage to be a fully insured
individual entitled to old age insurance benefits. A "quarter of coverage"
requires that an individual have been credited with $100 or more of
self-employment income in each quarter of the year. 42 U.S.C. § 413(a)(2).
In order to be credited with self-employment income an individual must
have received net earnings from a trade or business of at least $400.00 in
the taxable year. Kelley v. Celebrezze, 243 F. Supp. 18 (D.N.J., 1965).

The sole issue between the parties is based upon the existence of the
claimed net earnings.[2] The
Hearing Examiner has concluded as follows:

Because of the claimant's advanced years and her lack of understanding
record keeping, there must necessarily be some doubt about the accuracy of
the amount shown as cash received. In the absence of better corroborating
evidence than she was able to submit or the Administration's investigator
was able to find, there is insufficient proof of actual receipt of these
amounts. For the reasons stated, the Examiner is constrained to find that
the claimant has not acquired any quarters of coverage for Social Security
purposes and that her claim must be denied.

Plaintiff filed income tax returns as a self-employed person for the
years 1963, 1964, 1965 and 1966 and paid self-employment tax on the
amounts reported therein. The returns for these years disclose the
following incomes obtained from her seamstress trade:

Year

Total Income

Net

1963

$725.00

$725.00

1964

825.00

825.00

1965

700.00

700.00

1966

600.00

She reported no business expenses for any of these years, consequently
the figures for total and net income were exactly the same. Claimant
testified that a Social Security employee instructed her to write down how
much money was received from the various jobs and her expenses "on each
one of these cases."

The expenses, listed in a notebook for the years in issue, were not
business but rather personal expenses such as church donations, food,
medicines and clothing. The Hearing Examiner found that her business
expenses were minimal since her sewing machine was paid for and "rental
expenses attributable to the business could not possibly amount to more
than $100 a year." However, the Examiner determined that her inadequate
records, unsupported by better corroborating evidence, were insufficient
proof of actual receipt of the amounts claimed as net earnings.

Other documentary evidence offered by plaintiff consists of a school
notebook containing entries of her clients from 1963 through 1966 with
their names and addresses and the amounts paid by them each year for her
sewing services.

She explained that these entries were made in loose-leaf papers which
were thrown away when transferred to the notebook and that one of the
reasons for preparing the book was "to see if I could get the signatures
of all these people but, as it happened, a lot of times I would go over
and visit the clients and they would not be there." Not one of the thirty
clients included by her in the 1966 listing made in the notebook signed
their names under the amounts set forth therein as collected from them for
services during that period. Attempts made by representatives of the
Social Security Administration to locate as many clients as possible
revealed that many of these had either gone to the United States or moved
elsewhere.[3] Interviews with
those clients who could be contacted established that plaintiff sewed for
them but none of them could give any information with respect to the
amount of money paid to plaintiff for her work.

. . . Ernesta Casilla who appears as one of the clients signing the
notebook indicated in a written statement that she did not recall having
signed a notebook for Josefa Hernandez. She stated that during a period of
approximately two years plaintiff "might have made fifteen dresses * * *
for $1.25 or $2.00 per piece." Plaintiff's notes show only that she
collected $28.00 from this client in 1963 . . . .

Rev. Jose Hernandez, claimant's pastor, appeared as a witness on her
behalf and testified that she had a good reputation in the community but
he did not know anything about her sewing business. . . . Although he
recognized the names of several clients listed in the notebook who were
members of his church he couldn't affirm whether any of them had work done
by claimant. . . .

Andrea Diaz, the other witness for plaintiff, declared at the hearing
that the signature appearing under her name in the notebook was her own
but stated she couldn't specify as to the amount of money actually
paid.

A statement obtained from Mario Roldan Cass, plaintiff's landlord, as
part of the field investigation conducted by the Social Security
Administration revealed that she pays him $30.00 of monthly rental. He did
not know if she sewed "for business or not" and could not say "what her
sources of income are" . . . .

In another statement secured in 1964 from Ana Luisa Fernandez, claimant's
niece, as part of the investigation surrounding the 1963
application[4] she certified
having paid her aunt about $100.00 for her services the year before,
meaning in 1963. This person's name does not appear among those listed by
claimant (as client for 1963) or any other year in the notebook offered by
her in evidence as proof of earnings.

A Request for Reconsideration of the denial of her claim was signed by
Josefa Hernandez on February 25, 1967, and it was there indicated that the
following additional evidence would be submitted: "a dozen certifications
from some of the persons for whom I did sewing in 1960, 1961, 1962, 1963,
1964 and 1965. Those were my steadiest customers." Two days later claimant
gave a statement to the Social Security Administration explaining that
this was an error made by the lawyer who filled out the form for her and
adding: "I meant that I have already submitted certifications from the
customers." Claimant was obviously referring to twelve statements
addressed "To Whom It May Concern" whereby several clients certified as to
exact amounts paid to Josefa Hernandez for her services as a seamstress
during the years 1960, 1961 and 1962. These years as noted before are
those pertaining to the prior 1963 application. There are no
certifications of payment for the years 1963 through 1966 covered by the
current application.

(1) The Court finds that the test of substantiality of the evidence
requires it to uphold the Secretary's determination and the ensuing denial
of benefits. The role of judicial review is restricted by the stringent
limitations of the substantial evidence rule. Reyes Robles v. Finch
(Gardner) 409 F.2d 84 (1st Cir. 1969); Kelley v. Celebrezze, 243 F. Supp.
18 (D.N.J., 1968); Salgado v. Gardner, 265 F. Supp. 894, 895 (D.P.R.,
1967). The Court in reviewing a Social Security claim does not weigh the
evidence to determine whether it would have granted such claim but to
determine whether there is substantial evidence in the record submitted to
support the findings and conclusions reached by defendant. Collins v.
Secretary of Health, Education and Welfare, 286 F. Supp. 81 (W.D. Ark.,
1968). In Cardwell v. Celebrezze, 241 F. Supp. 328 at 330 (E.D. Tenn.,
1965) in which disallowance of old age insurance benefits was based on the
ground that no employer-employee relationship existed between claimant and
her brother-in-law, the court once more recognized the limitation placed
upon its discretion by the substantial evidence standard and affirmed
"even though its own feeling [was] that the intent of the Act and perhaps
its letter were tortured by the decision."

(2) An old-age insurance benefits claimant has the burden, like any other
claimant seeking the benefit of the statute, of establishing his claim.
Collins v. Secretary of Health, Education and Welfare, supra;
Johnson v. Gardner, 401 F.2d 518 (8th Cir., 1968). In our case the burden
falls on plaintiff to prove the amount of income or net earnings upon
which she founds her entitlement to benefits. She must produce evidence of
probative, not speculative, value to prove such earnings.

(3) A careful scrutiny of the record revealed the underlying facts of
this case as earlier discussed. It is unnecessary to pass once more upon
the evidence contained therein. Suffice it to say that claimant offered
her testimony and documentary evidence in the form of income tax returns
and a notebook in which she recorded her business transactions. Said
notebook was in fact a compilation of loose-leaf papers where she
annotated her dealings. These loose-leaf papers were not offered into
evidence since reportedly they were disposed of. She introduced no proof,
by affidavit or otherwise, with respect to amounts paid to her which could
corroborate the figures set forth in the notebook. As a matter of fact,
the weight of the evidence on record is to the effect that clients could
not testify as to amounts paid on any occasion.

In a recent opinion this Court stated that "the Social Security
Administration is not only privileged, but, in questionable cases, it is
obligated to investigate behind the form of self-employment tax returns
which an individual has filed. Furthermore the Regulations provide that
claimant shall submit proper and complete evidence in order to
substantiate the amount of self-employment income reported, which records
are subject to such verification as is deemed necessary to insure their
accuracy." (emphasis supplied) Picon v. Gardner, Civil No. 405-67,
Memorandum of Opinion dated January 26, 1968. It is the actual receipt of
self-employment income, not the reporting or payment of taxes thereon,
which is the crucial test for establishing a realistic claim. Bender v.
Celebrezze, 332 F.2d 113 (7th Cir., 1964).

Corroborating evidence plays an important role in achieving this. The
Court understands that the Administration by way of the investigation
conducted and the Hearing Examiner through the testimonial evidence
adduced from the plaintiff and other witnesses discharged their duty of
eliciting all the evidence available which would result in a fair
determination of plaintiff's claim. However, efforts to verify and
substantiate the records presented by claimant were essentially fruitless.
Claimant in turn has failed to introduce sufficient evidence of probative
value to support the amounts claimed by her. The task of proving actual
receipt of income remained unfulfilled. Though her good faith is not
questioned plaintiff did not come forward to meet the burden upon her. An
examination of the evidence supplied by her reveals this.

The Court is of the view that there is substantial evidence on the record
to support the Secretary's determination which resulted in denial of
old-age insurance benefits. Therefore, it is ordered, adjudged and decreed
that the decision of the Secretary of Health, Education and Welfare be
affirmed and the complaint is hereby dismissed.

[1] Under 42 U.S.C. § 411(a) the
term "net earnings from self-employment" is defined as "the gross income,
as computed under chapter 1 of Title 26, derived by an individual from any
trade or business carried on by such individual, less the deductions
allowed under such chapter which are attributable to such trade or
business, plus his distributive share (whether or not distributed) of the
ordinary net income or loss, as computed under Section 183 of Title 26,
from any trade or business carried on by a partnership of which he is a
member * * *" Section 411, subsection (b), in its pertinent part provides
that "self-employment income means the net earnings from self-employment
derived by an individual during any taxable year beginning after 1950."

[2] The decision of the Hearing
Examiner indicates that "if she did in fact have net earnings in the
amount she claims she had from 1963 through 1966, she would have acquired
11 quarters of coverage and would be fully insured." . . . Further on in
his decision the Examiner plainly sets forth the issue saying: "It is not
disputed that the claimant is in fact a seamstress, that she has a sewing
machine, and that she does do sewing for others. The only question is how
much she made during the years 1963 through 1966." . . .

[3] See: also, the Report of
Contact dated September 11, 1967, where the interviewer states:

"* * * The fact that most of the clients have moved from the area, some
before the dates shown on the notebook submitted as proof of payments made
to her, makes us conclude that the notebook is not a reliable record and
that figures shown there have been exaggerated. Our opinion is that the
applicant has failed to produce reliable evidence to establish the figures
shown in the returns and that through circumstantial evidence it has not
been possible to establish her correct income from the
self-employment."

[4] The statement of Ana Luisa
Fernandez is a part of Exhibit 21 on record which related only to the 1963
application of plaintiff claiming old-age insurance benefits based on net
earnings obtained in 1960, 1961 and 1962. Said application as mentioned
earlier was denied and is final and binding. This statement is now
considered only because the year 1963, during which Ana Luisa Fernandez
allegedly paid her claimant aunt $100.00 is one of the years in issue
concerning the pending application for old-age benefits.

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